Posts Tagged ‘IMF’

Barack Obama is on the record saying, “We don’t need a balanced budget amendment,” he said. “We simply need to make these tough choices and be willing to take on our bases.” Obama says, “I think it’s important for everybody to understand all of us believe we need to get to the point where we can balance the budget,” Mr. Obama said at a White House press conference. “We don’t need a constitutional amendment to do that.”

We desperately need a balanced budget amendment. What we DON’T need is Barack Hussein Obama and his endless rhetorical posturing.

The national debt that is acknowledged is currently more than $14.5 trillion.

Let’s take a brief trip down national debt memory lane. Now, let’s see. When Ronald Reagan left office, the national debt was $2.6 trillion. By the time Bush I left office, the national debt was $ trillion. By the time Bill Clinton left office, the national debt was $5.6 trillion (which is quite strange, given the constant claim that Clinton balanced the budget). By the time Bush II left office, the national debt was $10.6 trillion. It is currently at over $14.5 trillion, and Obama is not even through his first term yet. He wants it increased to more than $16 trillion now. Again, before the end of his first term.

And, of course that’s actually NOTHING. $14.5 trillion, or even $16 trillion, is actually really chump change to how much the United States REALLY owes. Read this figure published in a peer reviewed International Monetary Fund publication article that provides the grim reality:

Boston University economist Laurence Kotlikoff says U.S. government debt is not $13.5-trillion (U.S.), which is 60 per cent of current gross domestic product, as global investors and American taxpayers think, but rather 14-fold higher: $200-trillion – 840 per cent of current GDP. “Let’s get real,” Prof. Kotlikoff says. “The U.S. is bankrupt.”

Writing in the September issue of Finance and Development, a journal of the International Monetary Fund, Prof. Kotlikoff says the IMF itself has quietly confirmed that the U.S. is in terrible fiscal trouble – far worse than the Washington-based lender of last resort has previously acknowledged. “The U.S. fiscal gap is huge,” the IMF asserted in a June report. “Closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 per cent of U.S. GDP.”

This sum is equal to all current U.S. federal taxes combined. The consequences of the IMF’s fiscal fix, a doubling of federal taxes in perpetuity, would be appalling – and possibly worse than appalling.

Prof. Kotlikoff says: “The IMF is saying that, to close this fiscal gap [by taxation], would require an immediate and permanent doubling of our personal income taxes, our corporate taxes and all other federal taxes.

“America’s fiscal gap is enormous – so massive that closing it appears impossible without immediate and radical reforms to its health care, tax and Social Security systems – as well as military and other discretionary spending cuts.”

He cites earlier calculations by the Congressional Budget Office (CBO) that concluded that the United States would need to increase tax revenue by 12 percentage points of GDP to bring revenue into line with spending commitments. But the CBO calculations assumed that the growth of government programs (including Medicare) would be cut by one-third in the short term and by two-thirds in the long term. This assumption, Prof. Kotlikoff notes, is politically implausible – if not politically impossible.

One way or another, the fiscal gap must be closed. If not, the country’s spending will forever exceed its revenue growth, and no one’s real debt can increase faster than his real income forever.

Prof. Kotlikoff uses “fiscal gap,” not the accumulation of deficits, to define public debt. The fiscal gap is the difference between a government’s projected revenue (expressed in today’s dollar value) and its projected spending (also expressed in today’s dollar value). By this measure, the United States is in worse shape than Greece.

Prof. Kotlikoff is a noted economist. He is a research associate at the U.S. National Bureau of Economic Research. He is a former senior economist with then-president Ronald Reagan’s Council of Economic Advisers. He has served as a consultant with governments around the world. He is the author (or co-author) of 14 books: Jimmy Stewart Is Dead (2010), his most recent book, explains his recommendations for reform.

He says the U.S. cannot end its fiscal crisis by increasing taxes. He opposes further stimulus spending because it will simply increase the debt. But he does suggest reforms that would help – most of which would require a significant withering away of the state. He proposes that the government give every person an annual voucher for health care, provided that the total cost not exceed 10 per cent of GDP. (U.S. health care now consumes 16 per cent of GDP.) He suggests the replacement of all current federal taxes with a single consumption tax of 18 per cent. He calls for government-sponsored personal retirement accounts, with the government making contributions only for the poor, the unemployed and people with disabilities.

Without drastic reform, Prof. Kotlikoff says, the only alternative would be a massive printing of money by the U.S. Treasury – and hyperinflation.

As former president Bill Clinton once prematurely said, the era of big government is over. In the coming years, the U.S. will almost certainly be compelled to deconstruct its welfare state.

Prof. Kotlikoff doesn’t trust government accounting, or government regulation. The official vocabulary (deficit, debt, transfer payment, tax, borrowing), he says, is vulnerable to official manipulation and off-the-books deceit. He calls it “Enron accounting.” He also calls it a lie. Here is an economist who speaks plainly, as the legendary straight-shooting film star Jimmy Stewart did for an earlier generation.

But Prof. Kotlikoff’s economic genre isn’t the Western. It’s the horror story – “and scarier,” one reviewer of his book suggests, than Stephen King.

And what’s Obama’s response to all of this?

We are so screwed it is absolutely unreal.

And that’s just what the UNITED STATES government owes. Let’s consider the leftist People’s Republic of Californication and see what IT’S actual debt is:

The staggering amount of unfunded debt stands to crowd out funding for many popular programs. Reform will take something sadly lacking in the Legislature: political courage.

The state of California’s real unfunded pension debt clocks in at more than $500 billion, nearly eight times greater than officially reported.

That’s the finding from a study released Monday by Stanford University’s public policy program, confirming a recent report with similar, stunning findings from Northwestern University and the University of Chicago.

Yeah, you’re right, Mr. Fool-in-Chief. We don’t need a balanced budget amendment. Let’s go with your plan instead. Let’s dig our own graves, slit our own throats, and then fall into a hole never again to crawl out. Let’s sacrifice our children’s children’s children’s children and put the weight of a debt they will never be able to possibly repay as we continue to selfishly and wickedly vote ourselves benefits at their expense. Let’s guarantee that the United States becomes a banana republic in the next fifteen years.

We’re going to collapse soon. When it happens, it will seem to come out of the blue, but we will have been working steadily toward our own doom for generations.

Obama’s Keynesian approach has utterly and completely failed. And only fools refuse to see that by now.

It’s kind of interesting to see what’s going on. We’ve got an avowed socialist international banker who has been incredibly generous with other people’s money being accused of trying to redistribute a poor immigrant woman’s body to satisfy his lusts.

“The IMF booted Paul Wolfowitz (an American conservati­ve) over a consensual affair with a staffer, yet have remained silent while Strauss-Ka­hn (a European socialist) sits accused of r+ape.

As it has been reported, the IMF is weighing whether or not Dominique Strauss-Kahn is indicted as to whether or not to relieve him of his position. For the record, there were no criminal charges filed against Paul Wolfowitz. There was no indictment; they just canned him at the very first possible opportunity. And while Strauss-Kahn may well end resign to avoid perpetuating the circus atmosphere more than absolutely necessary (i.e., it stands to reason that a former head of the IMF would probably generate less attention than the current head of the IMF), let it stand for the record that even following a very clearcut rape allegation where even Strauss-Kahn is acknowledging that sex occurred, he has not been fired.

Not very, it turns out. If you’re a conservative, “fairness” means your head on a pike for what is clearly the tiniest infraction versus the socialist. I guess that’s what they mean by “social justice”; it means “justice” that always somehow favors socialists.

Here’s the story in a nutshell:

NEW YORK — The maid came from one of the world’s poorest countries to the U.S., working to support the teen daughter she raised alone. The penthouse suite at the Sofitel Hotel was just another room. She says she had no idea the man was a famous French politician. She says he tried to rape her. In addition, the New York Post reports that the alleged sex-assault victim lives in a Bronx apartment rented exclusively for adults with HIV or AIDS. The man, Dominique Strauss-Kahn, remained jailed under a suicide watch Wednesday as a lawyer for the woman sought to rebut whispered allegations that her charges were a conspiracy and a setup.

You’d think the left wing socialists who always claim to be on the side of the poor and the oppressed would be on the side of this poor immigrant housekeeper who may well be suffering from AIDS (the sacred cow of left wing diseases). But that would mean that left wing socialists wouldn’t be completely liars and hypocrites. And that simply isn’t true.

With that said, only the biting irony of Ann Coulter can adequately describe this situation:

I suppose we’ll know the truth when the DNA testing comes back, but close observers of privileged liberal men are not shocked by the accusations against Dominique Strauss-Kahn, the socialist head of the International Monetary Fund. (And you thought you were getting screwed by your banker!)

Only in Hollywood movies are handsome lacrosse players from nice families seen as likely rapists. In real life, they look more like the 5-foot-2-inch Roman Polanski or pudgy, unathletic Bill Clinton — or the homunculus 5-foot-2-inch Strauss-Kahn.

But, it is argued, how could Strauss-Kahn possibly think he could get away with the violent rape of a chambermaid in a $3,000-a-night hotel room, booked in his name?

First of all, Strauss-Kahn has evidently gotten away with treating the fairer sex as his playthings for some time. No wonder his nickname among the French is “le grand seducteur,” which I believe roughly translates to “the short, tubby serial rapist.”

The New York Times reports that as far back as 2007, Brussels journalist Jean Quatremer remarked on Strauss-Kahn’s troubled behavior — “close to harassment” — toward women, saying the press knew all about it, but never mentioned it because “we are in France.”

When Strauss-Kahn was appointed to the I.M.F., Quatremer sardonically warned that the international institution was not the same as France, but instead had “Anglo-Saxon morals.”

Second, it’s not unheard of that a wealthy liberal would assume the law does not apply to him. Actually, let me restate that: Wealthy liberals always assume that laws don’t apply to them. After all the waivers the Obama administration has been dishing out like candy, are there any liberals left to whom Obamacare will apply?

We might also ask how a governor of New York could think he could get away with hiring prostitutes to service him in similarly pricey hotels, bringing them across state lines, and using his friend’s names to book the girls, year after year.

But Eliot Spitzer thought he could get away with that. Fortunately he has been brought to justice and sentenced to hosting a lame show on CNN.

Still, rape is a more serious crime than being a frenzied masturbator paying for sex. For that, I give you Andrew Luster, multimillionaire Max Factor heir, whose mother gives to every liberal cause under the sun from Barbara Boxer and Loretta Sanchez to Moveon.org, Emily’s List and pro-gay marriage groups. (If only her son had been gay!)

Her son not only drugged and raped a string of women, but made videotapes of his crimes.

On the tapes, Luster can be seen sodomizing unconscious women with lighted marijuana cigarettes, candles and plastic swords, and then talking into the camera about the unconscious women lying on his bed. The tapes were carefully labeled with titles like “Shauna GHBing,” referring to gamma-hydroxybutyric acid, known as a date-rape drug.

Luster was cataloging video evidence of his own criminal acts — and yet he thought he could get away with it.

He almost did, too, fleeing the country during his 2003 trial. He was caught and is now serving 124 years in prison, having been convicted, in absentia, of 86 crimes, including 20 counts of drug-induced rape, 17 counts of raping an unconscious victim, and multiple counts of sodomy and oral copulation by use of drugs.

Also out of Southern California we have Roman Polanski, the legendary director of two good movies and about a hundred unbelievably horrible ones, who drugged and anally raped an underage girl, according to the police report.

Not only did Polanski think he could get away with it, he did get away with it by fleeing the country (to France) when he discovered, to his shock and dismay, that in America, a person can actually be sentenced to prison for drugging and raping a 13-year-old. That was in 1977. He has never been brought to justice.

Liberals supported Polanski’s evasion of punishment for child rape, with the Hollywood left denouncing his arrest in Switzerland a couple of years ago, howling that he had suffered enough! Wasn’t he prevented from coming to the U.S. to pick up his Oscar in 2003?

You know who’s suffered enough? Anybody who sat all the way through “The Pianist.”

As Phyllis Schlafly points out in her book “Feminist Fantasies” (with a stirring foreword by Ann Coulter), for centuries, famous left-wing men have treated “their wives and mistresses like unpaid servants.”

Their credo might well have been, “From each, according to my needs …”

Schlafly bases her review of liberal woman-haters on the book “Intellectuals” by historian Paul Johnson. Among the left-wing heroes highlighted by Schlafly from Johnson’s book are Jean-Jacques Rousseau, Ernest Hemingway, Henrik Ibsen, Bertrand Russell, Jean-Paul Sartre and Karl Marx.

Johnson writes that the pint-sized — 5 foot 2 1/2 inch — communist-sympathizing Sartre “was notorious for never taking a bath and being disgustingly dirty.” He said admiringly of the Nazis, “We have never been as free as we were under the German occupation.”

The flyweight Sartre famously turned Simone de Beauvoir into his “mistress, surrogate wife, cook and manager, female bodyguard and nurse.” (Sadly, she never learned how to give someone a sponge bath.) All the while, the smelly midget committed a stream of infidelities, viewing women “as scalps to add to his centaur’s belt.”

In “the annals of literature,” Johnson writes, “there are few worse cases of a man exploiting a woman.”

Like Spitzer, Luster and Polanski, liberal men seem driven by their massive insecurities (often based on physical defects, such as their diminutive size or soap allergies) to choose unconscious, illiterate, servant-class and teenage females as their sex partners. But let’s not drag pocket-sized Woody Allen’s name into this, as my column appears in many family newspapers.

Karl Marx kept a female slave from the time she was 8 years old, eventually using her not only as a servant but as his mistress, never acknowledging his child with her or paying her at all. She waited on him hand and foot while he explained to the world that profit is the stolen surplus value of the laborer. Like so many liberal icons, Marx seldom bathed and left his wife and children in poverty.

As Schlafly says, no wonder liberal women think men are pigs: Their men are pigs.

Maybe Strauss-Kahn is innocent, but students of liberal comportment base their suspicions of his guilt not on fairy tales from Lifetime: TV for Women, but on 200 years of disgusting sexual behavior by liberal men.

I was the one who boldfaced the two paragraphs above. They were simply too delicious in their total accuracy of depicting the fact that “liberal men are pigs” not to.

I can understand why the left wing would decry the treatment of their fellow socialist hero Dominique Strauss-Kahn; the man truly epitomizes them.

“I am absolutely certain that generations from now, we will be able to look back and tell our children that this was the moment when we began to provide care for the sick and good jobs to the jobless; this was the moment when the rise of the oceans began to slow and our planet began to heal… This was the moment — this was the time — when we came together to remake this great nation …”

– hasn’t seemed to work out very well in the real world. I mean who talks like that but a fascist demagogue promising a false Utopia, anyway? Not that most liberals have any clue whatsoever about the real world, mind you.

The evidence is crystal clear that Obama is a fascist and a demagogue. But the mainstream media is every bit as unlikely to tell the truth about Obama as Joseph Goebbels’ Ministry of Propaganda was likely to tell the truth about their Fuhrer.

The New York Times once said – as part of the irrational fascistic hype surrounding Obama – that:

WASHINGTON — At the core of Senator Barack Obama’s presidential campaign is a promise that he can transcend the starkly red-and-blue politics of the last 15 years, end the partisan and ideological wars and build a new governing majority.

Did Obama ever once come close to actually fulfilling that “core presidential promise”???

President Barack Obama has turned fearmongering into an art form. He has repeatedly raised the specter of another Great Depression. First, he did so to win votes in the November election. He has done so again recently to sway congressional votes for his stimulus package

When [Republican Rep. Eric] Cantor tried to justify his own position, Obama responded: “Elections have consequences, and at the end of the day, I won.”

Were those really the words that would “transcend the starkly red-and-blue politics of the last 15 years”??? In taking that stand, was there actually any chance whatsoever that Obama would “end the partisan and ideological wars”??? Is anyone frankly so morally and intellectually stupid to see these tactics as they way to “build a new governing majority”???

And of course, shortly after the American people rejected Obama in the largest shallacking in modern American history and voted against the Democrat Party in droves, Nancy Pelosi began to further degenerate into fascism (where elections shouldn’t matter unless the fascists win them), saying: “elections shouldn’t matter as much as they do.”

As I said, Obama is a fascist bully and a cynical demagogue. And yet the mainstream media has the unmitigated chutzpah to continue to insanely depict this cynical, lying, hypocrite demagogue as an inspirational figure.

The American people and the mushroom have something in common: both are kept in the dark and fed manure.

So you can understand why the American people – for all the information available to them – are so terribly ignorant about just what the hell is going on in our political system.

But as misinformed and lied-to as Americans are when it comes to the sea of lies they are presented with as “news,” they are still aware that fewer of them have jobs, fewer of them have homes, their food cost more, their fuel cost more and that the quality of their lives are rapidly slipping away under the policies of a failed president and his failed party.

America’s Best DaysThose Confident That America’s Best Days Lie Ahead Down to 31%
Monday, April 25, 2011

Voter confidence that the nation’s best days are still to come has fallen to its lowest level ever.

A new Rasmussen Reports national telephone survey of Likely Voters shows that just 31% believe America’s best days are in the future. That’s down three points from last month and is the lowest result found in polling since late 2006.

Fifty-three percent (53%) believe America’s best days are in the past, also the highest measurement in over four years. Sixteen percent (16%) are undecided. (To see survey question wording, click here.)

Separate polling finds that only 22% of Likely Voters believe the United States is now heading in the right direction. That ties the lowest level found during Barack Obama’s presidency.

While majorities of Republicans (68%) and voters not affiliated with either major political party (52%) believe America’s best days are in the past, a plurality of Democrats (45%) thinks its best days still lie ahead.

Fifty-eight percent (58%) of white voters believe America’s best days have come and gone, but the same number of black voters (58%) feel the opposite is true.

[…]

And of course, it is true: America’s days truly ARE behind us as long as Barack Hussein Obama and as long as Democrats are able to continue to lead. Either Democrats will go down, or America will go down.

But, liberals say, it was BUSH who made the economy fail. Two things: 1) how many years should that line of garbage continue to succeed? And 2) it was never true to begin with (also see here).

Do you know that Democrats had total control of both the House and the Senate from 2006 until 2010???

George Bush tried SEVENTEEN TIMES to warn Congress that unless we got control of the out-of-control Democrat-controlled Fannie Mae and Freddie Mac and the out-of-control housing and housing mortgage market that it was poisoning with piles of bad debt, our economy would go under. The problem had festered because Bush had reappointed the first black Fannie Mae CEO because of political correctness. Franklin Raines was a failure and a corrupt fraud who disguised massive debt. Further, fearing the same political correctness, Republicans had allowed themselves to be repeatedly stymied in their attempts to reform the Government Sponsored Enterprises Fannie and Freddie as Democrats screamd “racism.” John McCain was if anything even more clear in 2006 when there was still time to fix the developing crisis. McCain wrote (in 2006):

Congress chartered Fannie and Freddie to provide access to home financing by maintaining liquidity in the secondary mortgage market. Today, almost half of all mortgages in the U.S. are owned or guaranteed by these GSEs. They are mammoth financial institutions with almost $1.5 Trillion of debt outstanding between them. With the fiscal challenges facing us today (deficits, entitlements, pensions and flood insurance), Congress must ask itself who would actually pay this debt if Fannie or Freddie could not?

McCain asked, “Who would actually pay this massive debt for these incredibly risky liberal policies if Fannie or Freddie could not?’ And we now have the answer to that question, don’t we???

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980′s.

”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”

”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

REP. BARNEY FRANK, D-MASS.: “I think this is a case where Fannie and Freddie are fundamentally sound, that they are not in danger of going under. They’re not the best investments these days from the long-term standpoint going back. I think they are in good shape going forward.

They’re in a housing market. I do think their prospects going forward are very solid.”

John McCain correctly predicted a disaster. Barney Frank was still spouting outrageous lies just one month before the bottom fell out of Fannie Mae and Freddie Mac and then caused the bottom to fall out of the entire economy. Republicans were right and Democrats were disasterously wrong. And the American people responded by electing Democrats and purging Republicans. Because we were lied to, and because we have become a bad people who believe lies.

Democrats blocked every single move by both the Republicans and by George Bush. They actually threatened filibusters to prevent Bush from fixing the broken system that failed and it was DEMOCRATS who took our economy down the drain.

BEIJING: The Chinese economy will surpass that of the US by 2016, the International Monetary Fund ( IMF )) has predicted.According to the IMF’s forecast, based on “purchasing power parities”, China’s gross domestic product (GDP) will rise from $11.2 trillion in 2011 to $19 trillion in 2016, while the American economy will increase from $15.2 trillion to $18.8 trillion.

China’s share of the global economy will ascend from 14 percent to 18 percent, while the US’ share will descend to 17.7 percent, China Daily reported.

The Economist had predicted in December 2010 that China would overtake the US in terms of nominal GDP in 2019.

At the same time all of the other growing disasters is taking place, we have a crisis in the price of oil. And Obama has done nothing but exacerbate that crisis with energy policies that are even more destructive than Jimmy Carter’s.

Do you feel your nation growing smaller and smaller and weaker and weaker? That is the hope and change you voted for.

In the time that Obama has been president, we’ve gone from predicting China would overtake us by 2030, to 2019, to just five years away. And mark my words, it will be moved up yet again, before they overtake Obama’s ignorant stupidity even faster than that.

Under Obama, and due to his immoral and criminally reckless policies, we are spending like fools and at the same time insanely inflating our money supply (under the euphamism of “qantitative easing” or QE2. And here are the results:

The U.S. dollar’s downward slide is accelerating as low interest rates, inflation concerns and the massive federal budget deficit undermine the currency.

With no relief in sight for the dollar on any of those fronts, the downward pressure on the dollar is widely expected to continue.
The dollar fell nearly 1% against a broad basket of currencies this week, following a drop of similar size last week. The ICE U.S. Dollar Index closed at its lowest level since August 2008, before the financial crisis intensified.

“The dollar just hasn’t had anything positive going for it,” said Alessio de Longis, who oversees the Oppenheimer Currency Opportunities Fund.

The United States of America is dangerously close to complete collapse. One wrong move, one piece of bad news, just one thing, could send us into a collapse that will be impossible to stop.

And we are either being led by a total fool, or even worse, we are being led by a man who is actively plotting to collapse America to impose a radical leftwing ideology, and who doesn’t care one iota more about the American people than Adolf Hitler cared about the German people.

I’m sure you have probably picked up on my angry tone. I am angry; I’m beyond angry. Why? Because I see the beast foretold by the book of Daniel and the book of Revelation coming. I see the collapse coming, and the Antichrist riding in on his white horse to save the day. And I see that the same liberals, the same progressives, the same Democrats who caused this collapse will be the ones to welcome this coming world dictator. And it will be these same Democrats who call for the American people to take his mark on their hands or on their foreheads so that they can join the rest of the world and buy and sell.

Here’s one for you to put in your pipe to smoke on. Even if the U.S. were to seize the wealth of the entire planet, and even if we taxed all the wealth of not only the rich but the miserably poor as well, we STILL couldn’t pay off the debts that Democrats demand that we keep adding to until after we’ve reached that “straw that broke the camel’s back” point:

As the Obama administration prepares to finance a Fiscal Year 2011 budget deficit expected to top $1.6 trillion, the American public is largely unaware that the true negative net worth of the federal government reached $76.3 trillion last year.

That figure was five times the 2010 gross domestic product of the United States and exceeded the estimated gross domestic product for the world by approximately $14.4 trillion.

“As government obligations continue to spiral out of control and the U.S. government shows no willingness to make the magnitude of spending cuts required to return to fiscal responsible, the U.S. economy is headed to a great collapse coming in the form of a hyper-inflationary great depression,” says economist John Williams, author of the website Government Shadow Statistics.

The difference between the $1.3 trillion “official” 2010 federal budget deficit numbers and the $5.3 trillion budget deficit based on data reported in the 2010 Financial Report of the United States Government is that the official budget deficit is calculated on a cash basis, where all tax receipts, including Social Security tax receipts, are used to pay government liabilities as they occur.

The calculations in the 2010 Financial Report are calculated on a GAAP basis (Generally Accepted Accounting Principles) that includes year-for-year changes in the net present value of unfunded liabilities in social insurance programs such as Social Security and Medicare.

Under cash accounting, the government makes no provision for future Social Security and Medicare benefits in the year in which those benefits accrue.

“The broad GAAP-based federal deficits, including the Social Security and Medicare unfunded liabilities, have been in the $4 trillion to $5 trillion range in 2008 and 2009, and 2010’s deficit again likely was near $5 trillion, remaining both uncontrollable and unsustainable,” Williams wrote.

“The federal government cannot cover such an annual shortfall by raising taxes, as there are not enough untaxed wages and salaries or corporate profits to do so,” he warned.

In his analysis of the 2010 Financial Report of the United States, Williams listed both an official accounting and an alternative.

“The estimate of a broad 2010 GAAP-based deficit at $5 trillion is mine,” he noted. “At issue with the published report, consistent year-to-year accounting was not shown, with a large, one time reduction in reported 2010 Medicare liabilities, based on overly optimistic assumptions of the impact from recently enacted health care legislation.”

U.S. Government GAAP Accounting Federal Budget Deficits U.S. Treasury, Financial Report of the United States, 2002-2010 (John Williams, Shadow Government Statistics, ShadowStats.com)

Williams argues the total U.S. obligations, including Social Security and Medicare benefits to be paid in the future, have effectively placed the U.S. government in bankruptcy, even before we take into consideration any future and continuing social welfare obligations that may be embedded within the Obama administration’s planned massive overhaul of health care.

“The government cannot raise taxes high enough to bring the budget into balance,” Williams said. “You could tax 100 percent of everyone’s income and 100 percent of corporate profits and the U.S. government would still be showing a federal budget deficit on a GAAP accounting basis.”

Williams argues the U.S. government has condemned the U.S. dollar to “a hyperinflationary grave” by taking on debt obligations that will never be covered by raising taxes and/or by severely slashing government spending that has become politically untouchable.

“Bankrupt sovereign states most commonly use the currency printing press as a solution to not having enough money to cover obligations,” he cautioned. “The U.S. government and the Federal Reserve have committed the system to its ultimate insolvency, through the easy politics of a bottomless pocketbook, the servicing of big-moneyed special interests, gross mismanagement, and a deliberate and ongoing effort to debase the U.S. currency.”

He is concerned that the Federal Reserve will supplement its current policy of Quantitative Easing 2, or QE2, under which the Fed intends to purchase by mid-year 2010 another $600 billion of Treasury debt with “QE3.”

“These actions (QE2 and QE3) should pummel heavily the U.S. dollar’s exchange rate against other major currencies,” he concludes. “Looming with uncertain timing is a panicked dollar dumping and dumping of dollar-denominated paper assets, which remains the most likely event as a proximal trigger for the onset of hyperinflation in the near-term.”

Williams predicts that the early stages of hyperinflation will be marked by an accelerating upturn in consumer prices, a pattern that has already begun to unfold in response to QE2.

“For those living in the United States, long-range strategies should look to assure safety and survival, which from a financial standpoint means preserving wealth and assets,” he advises.

Williams suggests that physical gold in the form of sovereign coins priced near bullion prices remains the primary hedge in terms of preserving the purchasing power of the dollar, as well as stronger major currencies such as the Swiss franc, the Canadian dollar and the Australian dollar.

And as totally insane as that is, it might well even be worse than that.

$61.936 trillion sounds like a lot. And that’s the official figure for the International Monetary Fund’s estimate for U.S. indebtedness. But the IMF is giving credibility to a figure that makes that $62 trillion seem almost manageable:

Republicans are trying to get our spending under control, and Democrats are demonizing them every single step of the way. Because Democrats are demons, and demonizing is the only thing they know how to do.

For the record, Republicans are trying to cut an amount which is basically 1/30th of Obama’s budget deficit.

Boston University economist Laurence Kotlikoff says U.S. government debt is not $13.5-trillion (U.S.), which is 60 per cent of current gross domestic product, as global investors and American taxpayers think, but rather 14-fold higher: $200-trillion – 840 per cent of current GDP. “Let’s get real,” Prof. Kotlikoff says. “The U.S. is bankrupt.”

Writing in the September issue of Finance and Development, a journal of the International Monetary Fund, Prof. Kotlikoff says the IMF itself has quietly confirmed that the U.S. is in terrible fiscal trouble – far worse than the Washington-based lender of last resort has previously acknowledged. “The U.S. fiscal gap is huge,” the IMF asserted in a June report. “Closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 per cent of U.S. GDP.”

This sum is equal to all current U.S. federal taxes combined. The consequences of the IMF’s fiscal fix, a doubling of federal taxes in perpetuity, would be appalling – and possibly worse than appalling.

Prof. Kotlikoff says: “The IMF is saying that, to close this fiscal gap [by taxation], would require an immediate and permanent doubling of our personal income taxes, our corporate taxes and all other federal taxes.

“America’s fiscal gap is enormous – so massive that closing it appears impossible without immediate and radical reforms to its health care, tax and Social Security systems – as well as military and other discretionary spending cuts.”

He cites earlier calculations by the Congressional Budget Office (CBO) that concluded that the United States would need to increase tax revenue by 12 percentage points of GDP to bring revenue into line with spending commitments. But the CBO calculations assumed that the growth of government programs (including Medicare) would be cut by one-third in the short term and by two-thirds in the long term. This assumption, Prof. Kotlikoff notes, is politically implausible – if not politically impossible.

One way or another, the fiscal gap must be closed. If not, the country’s spending will forever exceed its revenue growth, and no one’s real debt can increase faster than his real income forever.

Prof. Kotlikoff uses “fiscal gap,” not the accumulation of deficits, to define public debt. The fiscal gap is the difference between a government’s projected revenue (expressed in today’s dollar value) and its projected spending (also expressed in today’s dollar value). By this measure, the United States is in worse shape than Greece.

Prof. Kotlikoff is a noted economist. He is a research associate at the U.S. National Bureau of Economic Research. He is a former senior economist with then-president Ronald Reagan’s Council of Economic Advisers. He has served as a consultant with governments around the world. He is the author (or co-author) of 14 books: Jimmy Stewart Is Dead (2010), his most recent book, explains his recommendations for reform.

He says the U.S. cannot end its fiscal crisis by increasing taxes. He opposes further stimulus spending because it will simply increase the debt. But he does suggest reforms that would help – most of which would require a significant withering away of the state. He proposes that the government give every person an annual voucher for health care, provided that the total cost not exceed 10 per cent of GDP. (U.S. health care now consumes 16 per cent of GDP.) He suggests the replacement of all current federal taxes with a single consumption tax of 18 per cent. He calls for government-sponsored personal retirement accounts, with the government making contributions only for the poor, the unemployed and people with disabilities.

Without drastic reform, Prof. Kotlikoff says, the only alternative would be a massive printing of money by the U.S. Treasury – and hyperinflation.

As former president Bill Clinton once prematurely said, the era of big government is over. In the coming years, the U.S. will almost certainly be compelled to deconstruct its welfare state.

Prof. Kotlikoff doesn’t trust government accounting, or government regulation. The official vocabulary (deficit, debt, transfer payment, tax, borrowing), he says, is vulnerable to official manipulation and off-the-books deceit. He calls it “Enron accounting.” He also calls it a lie. Here is an economist who speaks plainly, as the legendary straight-shooting film star Jimmy Stewart did for an earlier generation.

But Prof. Kotlikoff’s economic genre isn’t the Western. It’s the horror story – “and scarier,” one reviewer of his book suggests, than Stephen King.

It is DEMOCRATS (I call them “Demoncrats,” for “Demonic Bureaucrats”) who want to implode America and kill tens of millions of American people by plunging this country into a great depression that will make the last one in the 1930s seem like a fun-filled day at the beach.

It’s not going to be the richest people who starve to death and die miserably in the cold. It’s going to be all the people liberals love to say they care about – when in reality all they do is cynically manipulate them toward their own increasingly certain doom.

If you have a true death wish, and you vote Democrat, then by all means keep doing so, because they will give you the destruction and nihilism that you seek. That’s the real meaning of Obama’s “hope and change.”

Oct. 13 (Bloomberg) — Japan will be forced to default on its debt, Greece’s economy is “done” and Iceland is worse off than Greece, said J. Kyle Bass, the head of Dallas-based Hayman Advisors LP who made $500 million in 2007 on the U.S. subprime collapse.

Nations around the world will be unable to repay their debt and financial austerity in a country such as Ireland is “too late,” Bass said today at the Value Investing Congress in New York.

Japan’s economy may unravel in the next two to three years, and its interest payments will exceed revenue, he said. “Japan can’t fund itself internally,” Bass said.

The country’s year-over-year gross domestic product was 2.4 percent as of June 30. It has the world’s largest public debt, approaching 200 percent of its GDP amid a 5.1 percent jobless rate. Consumer price fell by one percent in September and has been negative each month since May 2009, as deflation has taken hold.

Pricing on Japanese interest-rate swaps is the best he’s ever seen, Bass said. Investors could make 50 to 100 times their capital betting on them, he said, calling them a lottery ticket on Japan’s economy.

Japanese bonds have returned 3.3 percent this year, according to Merrill Lynch Indexes, compared with a return of 0.872 percent in 2009.

Crisis

Bank Of Japan’s Governor Masaaki Shirakawa refused to expand monthly purchases of government bonds this year even as deflation persisted. The bank on Oct. 5 instead created a 5 trillion yen ($60 billion) fund to buy bonds and other assets, and pledged to keep its benchmark interest rate at “virtually zero” until the end of deflation is in sight. Deflation has been entrenched in the economy since 1998. The GDP deflator, a gauge of prices across the economy, has fallen 14 percent since 1997, according to data compiled by Bloomberg.

A financial crisis in 1997-98 precipitated by bad loans on Japanese lenders’ balance sheets stemming from burst land and stock-price bubbles of the early 1990s set off Japan’s deflation. Property prices have slumped for 17 of the past 19 years, and stocks remain 76 percent off of their 1989 peak, according to the Nikkei 225 Stock Average.

Japan’s currency traded at 81.79 per dollar, compared with 81.72. It touched 81.39 on Oct. 11, the strongest level since April 1995.

Bass began buying securities with shorter durations last year as he predicted central bank and government actions globally to rescue the financial system will result in “outright currency debasement.”

He began buying shorter-term debt and precious metals then, anticipating hyperinflation will lead to higher interest rates. Bass also said in May that Europe’s debt crisis will not be solved by the $1 trillion loan package the International Monetary Fund and the European Union agreed on earlier that month.

–Editors: Nick Baker, Dave Liedtka

And that was all BEFORE Japan went from the frying pan into the nuclear fire.

Concerns have emerged in global credit markets over how heavily-indebted Japan will be able to pay for its biggest economic reconstruction effort since World War II.

The Bank of Japan’s promise yesterday of a ¥15 trillion ($182 billion) cash injection into its banking system managed to soothe global equities, but not debt markets as Japanese government credit default swap rates used to insure against debt default soared 13 points to 92.

Although not yet at critical levels, analysts said yesterday’s sharp spike in the CDS rates highlighted debt market concerns about Japan’s funding pressures within a cash-strapped global economy.

“When you have a market the size of Japan down this much, it’s going to affect everybody,” Stephen Halmarick, head of investment markets research at Colonial First State Global Asset Management, said.

“A tragedy of this proportion is going to take up a lot of economic resources.

“It’s going to have quite a negative impact on growth.”

Credit markets were already concerned that Japanese government debt had ballooned to $US12.2 trillion, or 200 per cent of GDP.

Insurance experts estimate the repair bill carried by foreign reinsurers will be capped at $US34 billion, with the rest borne by Japanese insurers, the Government and uninsured homeowners.

Japan has so far managed to function under its debt because it has predominantly been funded by domestic investors and because it runs a steady trade surplus.

However, analysts caution that short-term liquidity constraints could prompt strong yen repatriation flows out of foreign markets as occurred after the Kobe earthquake.

Early estimates suggest the cost of the Sendai earthquake will easily exceed the $US100 billion Kobe earthquake in 1995.

Japan’s increased funding pressures are also occurring in a global economy far more cash-constrained than in 1995, and unless export earnings begin flowing soon, escalating funding costs could push the country’s financing costs over the tipping point.

Japan has been one of the biggest buyers of US Treasury debt and in January pledged to also buy up to one-fifth of bonds from the European Financial Stability Fund that was created to bail out Greece and Ireland, all of which will become secondary to Japanese funding needs for the next few months.

The country is also one of the world’s biggest holders of gold bullion.

Any decision to cash in on bullion’s record price and offload much of its sovereign holding would likely depress the gold price.

Japan’s Nikkei equities index slumped 6.2 per cent, its worse daily performance in two years.

[…]

What impact will it have on the global markets if the 3rd largest economy in the world defaults? What effect will it have on the ability of the world’s largest debtor – that’s YOU, America – to continue to get credit as WE begin to look more and more like a default-likely credit risk???

Japan was the second largest purchaser of American debt, and was so far ahead of #3 (Japan buys 3 1/4 times more of our debt than Britain), that it’s not even funny. The U.S. needs a sucker, I mean an investor, to continue to artificially prop-up our insane lifestyle. Who’s going to do that now?

What you’re going to see is either the Fed dramatically hasten the rate at which it devalues the dollar, which in turn will hasten the inevitable result of America becoming a banana republic, or a giant spike in interest rates as other U.S. debt buyers demand more reward for their risks.

A third alternative is that Japan could begin to sell off its US debt to raise money to rebuild. While that seems like the obvious course, it turns out in this crazy world it isn’t; were Japan to sell it’s U.S. debt, the result would surely kill the U.S. dollar, but it would also dramatically strengthen the yen and hurt Japan’s export market just when they need it most.

My point is it’s a lose-lose. And the U.S. loses right along with Japan.

We’re in trouble. And our leader is a fool. And we have a media that is hell-bent (literally) on ignoring or explaining away this fool’s actions and responses.

One of the things I came to believe as I realized that Obama would actually quite possibly get elected president was that our economy was dead meat. I entirely got out of the U.S. stock market entirely and won’t return until Obama and the Democrats are out of power. The reason is that I believed – and STILL believe – that when our economy collapses, it will happen very suddenly, like a house of cards falling down. And it might not start in America; rather, an event in another country will set off a spiral that will envelope us and expose us for what we truly are.

Boston University economist Laurence Kotlikoff says U.S. government debt is not $13.5-trillion (U.S.), which is 60 per cent of current gross domestic product, as global investors and American taxpayers think, but rather 14-fold higher: $200-trillion – 840 per cent of current GDP. “Let’s get real,” Prof. Kotlikoff says. “The U.S. is bankrupt.”

Writing in the September issue of Finance and Development, a journal of the International Monetary Fund, Prof. Kotlikoff says the IMF itself has quietly confirmed that the U.S. is in terrible fiscal trouble – far worse than the Washington-based lender of last resort has previously acknowledged. “The U.S. fiscal gap is huge,” the IMF asserted in a June report. “Closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 per cent of U.S. GDP.”

This sum is equal to all current U.S. federal taxes combined. The consequences of the IMF’s fiscal fix, a doubling of federal taxes in perpetuity, would be appalling – and possibly worse than appalling.

Our actual debt is not the fourteen trillion dollars that would be scary enough; it is $200 TRILLION.

That isn’t some rightwing thinktank saying that; it’s the IMF.

Japan had a literal meltdown. It is about to have a financial meltdown.

And America will not be far behind.

As you look at the current fiscal situation, with Democrats not just fighting to keep the status quo of reckless and morally and mentally insane spending that will necessarily bankrupt America – and with Democrats literally sitting back waiting to demonize Republicans as “mean-spirited” the moment they try to do what is absolutely necessary to get our skyrocketing spending under control – realize that the United States is necessarily going to explode and collapse just like those reactors in Japan.

Republicans are trying to get our spending under control, and Democrats are demonizing them every single step of the way. Because Democrats are demons, and demonizing is the only thing they know how to do.

For the record, Republicans are trying to cut an amount which is basically 1/30th of Obama’s budget deficit.

Boston University economist Laurence Kotlikoff says U.S. government debt is not $13.5-trillion (U.S.), which is 60 per cent of current gross domestic product, as global investors and American taxpayers think, but rather 14-fold higher: $200-trillion – 840 per cent of current GDP. “Let’s get real,” Prof. Kotlikoff says. “The U.S. is bankrupt.”

Writing in the September issue of Finance and Development, a journal of the International Monetary Fund, Prof. Kotlikoff says the IMF itself has quietly confirmed that the U.S. is in terrible fiscal trouble – far worse than the Washington-based lender of last resort has previously acknowledged. “The U.S. fiscal gap is huge,” the IMF asserted in a June report. “Closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 per cent of U.S. GDP.”

This sum is equal to all current U.S. federal taxes combined. The consequences of the IMF’s fiscal fix, a doubling of federal taxes in perpetuity, would be appalling – and possibly worse than appalling.

Prof. Kotlikoff says: “The IMF is saying that, to close this fiscal gap [by taxation], would require an immediate and permanent doubling of our personal income taxes, our corporate taxes and all other federal taxes.

“America’s fiscal gap is enormous – so massive that closing it appears impossible without immediate and radical reforms to its health care, tax and Social Security systems – as well as military and other discretionary spending cuts.”

He cites earlier calculations by the Congressional Budget Office (CBO) that concluded that the United States would need to increase tax revenue by 12 percentage points of GDP to bring revenue into line with spending commitments. But the CBO calculations assumed that the growth of government programs (including Medicare) would be cut by one-third in the short term and by two-thirds in the long term. This assumption, Prof. Kotlikoff notes, is politically implausible – if not politically impossible.

One way or another, the fiscal gap must be closed. If not, the country’s spending will forever exceed its revenue growth, and no one’s real debt can increase faster than his real income forever.

Prof. Kotlikoff uses “fiscal gap,” not the accumulation of deficits, to define public debt. The fiscal gap is the difference between a government’s projected revenue (expressed in today’s dollar value) and its projected spending (also expressed in today’s dollar value). By this measure, the United States is in worse shape than Greece.

Prof. Kotlikoff is a noted economist. He is a research associate at the U.S. National Bureau of Economic Research. He is a former senior economist with then-president Ronald Reagan’s Council of Economic Advisers. He has served as a consultant with governments around the world. He is the author (or co-author) of 14 books: Jimmy Stewart Is Dead (2010), his most recent book, explains his recommendations for reform.

He says the U.S. cannot end its fiscal crisis by increasing taxes. He opposes further stimulus spending because it will simply increase the debt. But he does suggest reforms that would help – most of which would require a significant withering away of the state. He proposes that the government give every person an annual voucher for health care, provided that the total cost not exceed 10 per cent of GDP. (U.S. health care now consumes 16 per cent of GDP.) He suggests the replacement of all current federal taxes with a single consumption tax of 18 per cent. He calls for government-sponsored personal retirement accounts, with the government making contributions only for the poor, the unemployed and people with disabilities.

Without drastic reform, Prof. Kotlikoff says, the only alternative would be a massive printing of money by the U.S. Treasury – and hyperinflation.

As former president Bill Clinton once prematurely said, the era of big government is over. In the coming years, the U.S. will almost certainly be compelled to deconstruct its welfare state.

Prof. Kotlikoff doesn’t trust government accounting, or government regulation. The official vocabulary (deficit, debt, transfer payment, tax, borrowing), he says, is vulnerable to official manipulation and off-the-books deceit. He calls it “Enron accounting.” He also calls it a lie. Here is an economist who speaks plainly, as the legendary straight-shooting film star Jimmy Stewart did for an earlier generation.

But Prof. Kotlikoff’s economic genre isn’t the Western. It’s the horror story – “and scarier,” one reviewer of his book suggests, than Stephen King.

Let me summarize what is going on: the Western world (and most definitely the United States) is playing the subprime loan game. We’re not talking about a few schmucks; we’re talking about the whole country.

We’re borrowing huge sums of money at a current rate of about 3% interest. But as the lenders start getting nervous, they’re going to want to increase that interest. We are in plenty of trouble paying these trillions of dollars back at 3% – but what happens if the interest increases to 5% or 7% as it could very quickly do? The costs of paying these loans would rise to catastrophic levels, and we could find ourselves literally bankrupt overnight.

That’s what happened to Greece. And it’s what’s ultimately going to happen to the USA.

It began in Athens. It is spreading to Lisbon and Madrid. But it would be a grave mistake to assume that the sovereign debt crisis that is unfolding will remain confined to the weaker eurozone economies. For this is more than just a Mediterranean problem with a farmyard acronym. It is a fiscal crisis of the western world. Its ramifications are far more profound than most investors currently appreciate.

There is of course a distinctive feature to the eurozone crisis. Because of the way the European Monetary Union was designed, there is in fact no mechanism for a bail-out of the Greek government by the European Union, other member states or the European Central Bank (articles 123 and 125 of the Lisbon treaty). True, Article 122 may be invoked by the European Council to assist a member state that is “seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control”, but at this point nobody wants to pretend that Greece’s yawning deficit was an act of God. Nor is there a way for Greece to devalue its currency, as it would have done in the pre-EMU days of the drachma. There is not even a mechanism for Greece to leave the eurozone.

That leaves just three possibilities: one of the most excruciating fiscal squeezes in modern European history – reducing the deficit from 13 per cent to 3 per cent of gross domestic product within just three years; outright default on all or part of the Greek government’s debt; or (most likely, as signalled by German officials on Wednesday) some kind of bail-out led by Berlin. Because none of these options is very appealing, and because any decision about Greece will have implications for Portugal, Spain and possibly others, it may take much horse-trading before one can be reached.

Yet the idiosyncrasies of the eurozone should not distract us from the general nature of the fiscal crisis that is now afflicting most western economies. Call it the fractal geometry of debt: the problem is essentially the same from Iceland to Ireland to Britain to the US. It just comes in widely differing sizes.

What we in the western world are about to learn is that there is no such thing as a Keynesian free lunch. Deficits did not “save” us half so much as monetary policy – zero interest rates plus quantitative easing – did. First, the impact of government spending (the hallowed “multiplier”) has been much less than the proponents of stimulus hoped. Second, there is a good deal of “leakage” from open economies in a globalised world. Last, crucially, explosions of public debt incur bills that fall due much sooner than we expect.

For the world’s biggest economy, the US, the day of reckoning still seems reassuringly remote. The worse things get in the eurozone, the more the US dollar rallies as nervous investors park their cash in the “safe haven” of American government debt. This effect may persist for some months, just as the dollar and Treasuries rallied in the depths of the banking panic in late 2008.

Yet even a casual look at the fiscal position of the federal government (not to mention the states) makes a nonsense of the phrase “safe haven”. US government debt is a safe haven the way Pearl Harbor was a safe haven in 1941.

Even according to the White House’s new budget projections, the gross federal debt in public hands will exceed 100 per cent of GDP in just two years’ time. This year, like last year, the federal deficit will be around 10 per cent of GDP. The long-run projections of the Congressional Budget Office suggest that the US will never again run a balanced budget. That’s right, never.

The International Monetary Fund recently published estimates of the fiscal adjustments developed economies would need to make to restore fiscal stability over the decade ahead. Worst were Japan and the UK (a fiscal tightening of 13 per cent of GDP). Then came Ireland, Spain and Greece (9 per cent). And in sixth place? Step forward America, which would need to tighten fiscal policy by 8.8 per cent of GDP to satisfy the IMF.

Explosions of public debt hurt economies in the following way, as numerous empirical studies have shown. By raising fears of default and/or currency depreciation ahead of actual inflation, they push up real interest rates. Higher real rates, in turn, act as drag on growth, especially when the private sector is also heavily indebted – as is the case in most western economies, not least the US.

Although the US household savings rate has risen since the Great Recession began, it has not risen enough to absorb a trillion dollars of net Treasury issuance a year. Only two things have thus far stood between the US and higher bond yields: purchases of Treasuries (and mortgage-backed securities, which many sellers essentially swapped for Treasuries) by the Federal Reserve and reserve accumulation by the Chinese monetary authorities.

But now the Fed is phasing out such purchases and is expected to wind up quantitative easing. Meanwhile, the Chinese have sharply reduced their purchases of Treasuries from around 47 per cent of new issuance in 2006 to 20 per cent in 2008 to an estimated 5 per cent last year. Small wonder Morgan Stanley assumes that 10-year yields will rise from around 3.5 per cent to 5.5 per cent this year. On a gross federal debt fast approaching $1,500bn, that implies up to $300bn of extra interest payments – and you get up there pretty quickly with the average maturity of the debt now below 50 months.

The Obama administration’s new budget blithely assumes real GDP growth of 3.6 per cent over the next five years, with inflation averaging 1.4 per cent. But with rising real rates, growth might well be lower. Under those circumstances, interest payments could soar as a share of federal revenue – from a tenth to a fifth to a quarter.

Last week Moody’s Investors Service warned that the triple A credit rating of the US should not be taken for granted. That warning recalls Larry Summers’ killer question (posed before he returned to government): “How long can the world’s biggest borrower remain the world’s biggest power?”

On reflection, it is appropriate that the fiscal crisis of the west has begun in Greece, the birthplace of western civilization. Soon it will cross the channel to Britain. But the key question is when that crisis will reach the last bastion of western power, on the other side of the Atlantic.

The writer is a contributing editor of the FT and author of ‘The Ascent of Money: A Financial History of the World‘

The United States is on life support, and it won’t be long before the doctor turns off the machine and calls the time of death:

“Within 12 years…the largest item in the federal budget will be interest payments on the national debt,” said former U.S. Comptroller General David Walker. “[They are] payments for which we get nothing.”

Economic forecasters say future generations of Americans could have a substantially lower standard of living than their predecessors’ for the first time in the country’s history if the debt is not brought under control.

We now expect the US budget deficit to rise to $1.64 trillion (11.2% of GDP) in fiscal year (FY) 2010 and to total $10.8 trillion (trn) over the next ten years. This profile is modestly above our early October forecast and well above the administration’s figures.

Even so, near-term risks lie to the side of a bigger deficit. Tax receipts have started the year in a deep hole and could continue to fall short. And if the economy struggles as the current dose of fiscal stimulus wears off, as we expect, then policymakers are apt to adopt more stimulus than we have assumed.